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Psychology of an Overspender - 9/12/2012 -

The logistics of keeping a healthy bank account seem easy enough. It makes logical sense that you should spend less than what you have to keep your account from going in the red. Yet every day an otherwise financially comfortable account-holder will find that the negatives have snuck into their bank accounts and even theyíll scratch their heads, wondering what happened.

There are times when we canít help going in the red, especially in the current economy, but then there are those who are of a different variety altogether. These are the overspendersópeople who find themselves in overdraft even though they theoretically have enough money to live comfortably.

Some statistics estimate that as many as 43 percent of American consumers spend more than they earn each year, according to Christs Comeaux, Assistant Vice President with Lakeside Bank.

"Itís certainly true that many people currently donít earn enough to cover their bills. Thatís a different issue entirely. The problem with overspenders isnít that they donít make enough money. Itís that they spend too much of the money they have and donít have an adequate budget or spending strategy,Ē said Comeaux. "Overspenders often believe that their problems would be solved if they earned more money, but overspending is a financial habit. Itís not an issue of dollars. You can earn two-hundred thousand a year and still go in the red on a consistent basis if you havenít developed sound financial habits. Spending too much money is a habit just as Ďpenny-pinchingí is considered a habit.Ē

According to Comeaux, there are several reasons why overspenders consistently send their bank accounts into overdraft:

Poor budgeting skills. Most modern consumers understand the validity of having a household budget, yet few maintain one, Comeaux said. "Some customers, in moments of stress and frustration, will sit down and write out a budget. Obviously, thatís a good approach. Unfortunately, the budget may only last a day or two before things go back to normal,Ē Comeaux said. "They key is to write out a budget and stick to it. Tell yourself that youíll stick to the budget for a week and when that week is over, tell yourself youíll do it for another week.Ē According to Comeaux, becoming a responsible spender is a lifestyle change and it will take time for the new habits to take hold.

Keeping up with the Joneses. Luckily, things have changed with this phenomenon as the economy has taken big hits over the past several years, but some continue to have a belief that they need to have a new house, new car, new gadget, and so on. "Whatís ironic is that while youíre keeping up with the Joneses, the Joneses are trying to keep up with someone else,Ē Comeaux said. "Thatís how consumers in this country developed such an overburden of personal debt in the first place. You should only have to keep up with yourself and your budget. If you truly want to live comfortably, thatís how you do it.Ē

Poor Knowledge of Personal Finances. This plays into the budgeting scenario. According to Comeaux, many consumers donít have a solid concept of how much they earn versus how much they spend. "With so many people living paycheck to paycheck, itís easier to see tomorrow rather than next month or next year,Ē Comeaux said. "This sometimes leads to impulsive spending. Sometimes itís a wake-up call to sit down with your financial statements and take a good, hard look at what youíre spending your money on. The results may surprise you and jolt you into developing a better budget.Ē

Spending now for future windfalls. One of the biggest errors in judgments that overspenders make is spending money today for money theyíll have tomorrow. If you know youíll get paid on Thursday, it doesnít mean you should spend more money on Tuesday, Comeaux said. If youíre expecting a payout of some sortóbonus from work, financial settlement, tax refund, loan moneyódonít include it in todayís budget if you donít have it yet. "As the old saying goes, donít count your chickens before they hatch,Ē Comeaux said. "Make a budget for money you have, not money that you think youíll have. As we know all too well, things donít always work out the way we plan. The tax refund check may get sent to the wrong address. The settlement money may get held up. The work bonus may not be the same as it was last year. If you have the money, incorporate it in your budget. If you donít have the money, thenówell, you donít have the money.Ē

Focusing on getting more money, rather than spending less. Itís common for overspenders to focus on how to make more money to avoid going in the red, rather than focusing on how to curb spending. "If you donít make enough money, thatís one thing. If youíre spending every penny you have every paycheck on things you donít need, thatís another. The only way to know for sure is to pick through your statements with a fine-toothed comb. That way youíll understand your personal habits and youíll see where you can make vast improvements,Ē Comeaux said.


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